Author: Miix Capital Source: medium

Introduction

If you ask, what is the biggest surprise in the encryption world in 2023? The answer must be ETF, Inscription and DePIN, of which DePIN is a new sprout from an old tree. Helium, established in 2021, has created the biggest surprise so far.

1. The DePIN track is spreading

DePIN covers a wide range of areas, including server networks, Wireless networks, sensor networks and energy networks. According to predictions by encryption research firm Messari, the overall industry size of DePIN is currently approximately US$2.2 trillion and is expected to grow to US$3.5 trillion by 2028.

With the topics of Mobile and Honey sweeping the entire Internet, old projects such as Fil and Storj have also returned to the field of vision. The popularity of the DePIN track has spread rapidly. In the DePIN growth rankings, MOBILE, IOT and HNT have always performed well, and Streamer Network's DATA token has also performed well, with a maximum increase of more than 215% in 7 days. This seems to tell us that DePIN has become a hot trend at the moment and will occupy an extremely important position in the new cycle.

2. Solana and DePIN go both ways

The market value of the DePIN ecosystem on Solana is second only to Ethereum, reaching $2.7 billion, is only one step away from Ethereum’s $3 billion. In the past year, both Solana and DePIN have shown significant growth, allowing us to witness the synergistic power of the combination of the Solana blockchain and the DePIN protocol.

Helium bundled with Solana narrative

In September 2022, Helium developer Nova Labs announced a partnership with Telecom giant T-Mobile has signed a mobile virtual network operator (MVNO) agreement to launch commercial mobile smartphone services under the Helium Mobile brand in the first quarter of 2023.

In November 2022, Nova Labs stated that it would support Solana Labs’ new Saga phone (the Saga phone is Solana’s flagship Android device and is tightly integrated with the Solana blockchain ) Users are provided with a SIM card and a free trial.

In early 2023, Helium successfully completed the migration to Solana, proving the feasibility of building a DePIN business on Solana and triggering the growth of the entire DePIN sector.

Under the dual superposition of Solana's empowerment and DePIN's narrative, the price of $MOBILE has been rising all the way, and achieved an intraday increase of 110% in December, with a single day Leading the rise in the DePIN track-related generation, it has comprehensively driven and assisted the growth of the DePIN track.

Solana Ecosystem strongly promotes DePIN

Solana Ecosystem focuses on DeFi and Memecoin and DePIN on. Kuleen Nimkar, head of DePIN at the Solana Foundation, once pointed out in an interview with The Block: “The DePIN projects on Solana (including Helium, Render, Hivemapper, etc.) demonstrate the potential of a decentralized physical infrastructure network to elevate the gig economy to a new level. At the same time, Helium, as Solana’s ecological head DePIN project, is also one of Solana’s core strategic focuses in 2024.”

Kuleen believes that contributors to the DePIN network can earn considerable income by supporting the network early on, and the tokens earned will subsequently appreciate in value as the network develops. : "This has never happened in the web2 gig economy, and early Uber drivers did not see the huge benefits of supporting Uber before it became a giant."

It can be seen that Solana also hopes to cooperate more with DePIN to form a strong binding relationship similar to DeFi and Ethereum, Inscription and Bitcoin, and build itself unique ecosystem. Along with the general rise in Solana's DePIN track tokens, it just helps us prove that Solana attaches great importance to DePIN and the positive market effect it brings.

3. Advantages and obstacles coexist for a long time

Resource sharing and efficient utilization

The most essential core of DePIN is resource integration, that is, using tokens to encourage users to share resources, so that resources can flow to the demand side efficiently. Therefore, the characteristics of DePIN are also clear at a glance:

• Crowdsourced hardware - more cost-effective

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• Collective ownership — aligns with and rewards users

• Democratic access – an open and unrestricted network environment

• Decentralized – no permissions or censorship required Resistance

DePIN and traditional infrastructure are just like DeFi and CeFi. It weakens the role of middlemen to some extent. Make resources flow more smoothly between the supply side and the demand side.

The flywheel effect of the DePIN model

Due to the use of tokens, the DePIN project can benefit from positive Benefiting from the flywheel effect, where increased usage (demand) increases the token price through burns or buybacks, which then provides additional incentives for contributors to continue building the network as the dollar value of the tokens they receive increases.

As the network grew, investors became increasingly interested and began to support the project with funds. If a project is open source or provides contributor/user data to the public, developers can build dapps on top of the data to create additional value in the ecosystem, thereby attracting more users and contributors. The image below shows an example of how this flywheel works on today's market.

Technology and models are not mature enough

What DePIN wants to achieve is the democratization of infrastructure. By allowing individuals and small businesses to participate in the deployment and operation of infrastructure networks, DePIN enables more equitable access to basic services and resources. Therefore, DePIN is an imaginative track that can both "put old wine in new bottles" and completely break through the boundaries of the industry.

The core of DePIN is a complete infrastructure system built by the token incentive system, but currently it is more of a miner model similar to Filecoin, with excessive initial rewards and large scale in the later period. The effect cannot be maintained. We have yet to see a token economic model that can support the growth and maturity of the DePIN ecosystem. And most DePIN projects focus on how to incentivize participants to purchase hardware, with only a few projects trying to solve the financialization model that drives demand.

Whether it is from a technical perspective, from a cost perspective, or from a financial model optimization perspective, DePIN still has a long way to go. The author believes that the maturity of the DePIN track requires at least 10 times of growth space before it can get rid of the short-term enthusiasm and enter the long-term development path.

4. Summary

DePIN track projects are increasing day by day, especially in the recent market. The hot trend illustrates the market’s recognition of this track. However, the DePIN track is relatively new, and its absolute growth value is not very high. As a result, it is relatively niche in the entire web3 market and needs more attention and resources, including more investors starting to pay attention to this direction, so that more people Community developers are willing to join this track and develop and deepen applications together.

In 2024, with the new round of market cycle, DePIN will inevitably participate in it, but there are more unknowns whether it will become DePIN's big year. Once an excellent or even revolutionary financial model emerges in the field of DePIN, all of this will no longer be a problem. The DePIN flywheel will spontaneously drive to solve all technical and cost issues.

But in the long run, DePIN’s maturation will inevitably require long-term investment and operational development by the market, institutions and developers before it can gradually penetrate into people’s lives. In life and applications, it goes from being complementary to parallel to existing infrastructure to replacing it.

About Depin

1. What is DePIN

DePIN (Decentralized Physical Infrastructure), proposed by Messari in December 2022, uses blockchain technology and token rewards to motivate individuals and companies around the world to decentralize A way to build any infrastructure in the physical world (WiFi, hard drive storage, batteries, etc.) to provide services to anyone, DePIN is the next stage in the development of cryptographic networks, dedicated to deploying physical infrastructure and hardware in the real world.

2. DePIN network composition

Physical Resource Network (PRN): Incentivize participants to use Location-based hardware that provides unique goods and services in the real world, such as WIFI, 5G, VPN, energy information sharing, and geospatial data;

Digital Resource Network ( DRN): A real-world physical infrastructure network that encourages participants to use hardware to provide digital resources, such as broadband networks, storage networks, and computing power networks;

3. DePIN Core logic

DePIN uses token incentives to encourage users to share network resources, including GPU computing power, hotspots, storage space, etc. The purpose is to achieve efficient use of resources and demand matching while individual resource providers can obtain actual incentives.